Working Paper: NBER ID: w15383
Authors: Darius N. Lakdawalla; Seth A. Seabury
Abstract: Policymakers and the public are concerned about the role of medical malpractice liability in the rising cost of medical care. We use variation in the generosity of local juries to identify the causal impact of malpractice liability on medical costs, mortality, and social welfare. The effect of malpractice on medical costs is large relative to its share of medical expenditures, but relatively modest in absolute terms--growth in malpractice payments over the last decade and a half contributed at most 5.0% to the total real growth in medical expenditures, which topped 33% over this period. On the other side of the ledger, malpractice liability leads to modest reductions in patient mortality; the value of these more than likely exceeds the cost impacts of malpractice liability. Therefore, policies that reduce expected malpractice costs are unlikely to have a major impact on health care spending for the average patient, and are also unlikely to be cost-effective over conventionally accepted ranges for the value of a statistical life.
Keywords: medical malpractice; health care costs; social welfare; defensive medicine
JEL Codes: I1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Malpractice liability (K13) | Defensive medicine practices (I11) |
| Expected social costs of malpractice (K13) | Social welfare (I38) |
| Malpractice liability (K13) | Medical costs (H51) |
| Reduction in malpractice costs (J32) | Reduction in total health care expenditures (H51) |
| Growth in malpractice payments (K13) | Increase in medical expenditures (H51) |
| Malpractice costs (J32) | Patient mortality (I12) |